Worst is Over for the Calgary Housing Market

The worst is over for Calgary’s housing market as it turned the corner in 2017 and experts are expecting an even rosier outlook for 2018.

After struggling through two years of a vicious recession in 2015 and 2016, many indicators, including GDP and employment growth, will buoy spirits in the Calgary region, fostering a positive environment for the residential real estate market.

“Overall in the housing market, whether it’s the new home or the resale, we’re expecting to see activity gradually improve. Overall, the economy has been making some gains,” says Richard Cho, principal, market analysis, with Canada Mortgage and Housing Corp.

He says a combination of factors will drive the housing market – economic, employment and population growth as well as mortgage rates which are expected to remain relatively low.

“Consumer sentiment in the market has also been improving and that should help support it in 2018,” adds Cho.

The CMHC 2018 Housing Market Outlook for the Calgary region shows the following forecast:

Single-detached starts will range from 4,200 to 4,600 – up from 4,100 to 4,500 in 2017;

Multi-family starts will be between 6,000 to 6,500 – down from 6,700 to 7,300 in 2017;

MLS sales will range from 23,300 to 24,900 – in the same range as 2017 which is 23,000 to 24,600;

MLS average sale price will be between $477,300 to $482,700 – an increase from 2017 which is $468,800 to $474,200;

The five-year mortgage rate will range from 4.9 to 5.7 per cent – compared to 4.6 to five per cent in 2017;

The October rental market vacancy rate will be six per cent – down from 6.8 per cent this year;

The two-bedroom monthly average October rent will be $1,250 – up from $1,240 this year;

The population will grow to 1,523,700 from 1,495,600 this year; and

Annual employment will rise to 845,600 from 832,200 this year.

Allan Klassen, senior vice-president of Calgary homes for Brookfield Residential, says the homebuilder has a multi-year lens in its business planning. It pays attention to interest rates, employment numbers, in-migration data and the prospects for economic growth.

Calgary is expected to lead the country in growth, supported by positive but modest international and inter-provincial migration. The prospect for increases in interest rates tempers this somewhat – but Brookfield remains positive and realistic in its forward outlook, says Klassen.

“I believe consumer confidence is coming back to the housing market. We have seen positive job growth, international immigration and GDP, all good signs for a recovering market. We see 2018 as a steady follow-up to 2017, due to the strong fundamentals of jobs, economic growth, a steadying of oil prices and our city’s adaptation and resiliency in our new normal,” he says.

The one area of apprehension in the housing market is in the multi-family sector where the inventory remains high. This is mostly due to a high level of new construction that took place in the past few years.

But Guy Huntingford, CEO of BILD Calgary Region, says inventory levels for single-family homes are exactly where builders would like them to be particularly in developing areas of the city.

“There’s still pent-up demand in very many areas of the city. I think our industry is quite bullish about that particular market,” adds Huntingford.

Corinne Lyall, broker/owner, Royal LePage Benchmark, says home price appreciation this year is promising but it is important to keep in mind the comparison was to last year when prices were still depressed.

“This uplift is a good sign and we remain cautiously optimistic. However, until we see the price of oil stabilize over $50 per barrel and full-time employment numbers increase, the recovery will continue to be slow,” says Lyall. “Both buyers and sellers who were waiting on the sidelines for the housing market to show signs of recovery started to re-engage in recent months.”

Ann-Marie Lurie, chief economist with the Calgary Real Estate Board, says Calgary’s economic conditions are improving on a slow basis so she doesn’t expect any significant change overnight for the housing market.

With employment growth expected to be moderate, it implies the “resale market will be fairly similar to what we’ve seen in previous years,” says Lurie. “The general sense is continuing on with some of the stability we’ve seen in the market but not a lot of growth.”

The Top Ten Towns and Cities in Alberta report by the Real Estate Investment Network (REIN) listed Calgary as second behind Edmonton in the province. It says the city weathered the natural resource sector tumble well and should begin recovery through 2018.

“On average, prices are down slightly from the same time last year. However, when we look at the overall trend, we see prices took a strong move upwards in the first three quarters of 2017, indicating some confidence moving back in the housing market,” notes the report authored by REIN’s Don Campbell, senior analyst, and Jennifer Hunt, vice-president.

“This demonstrates the housing market appears to have hit a longer-term trough in real estate values. Most of these increases in prices are for detached homes where apartments and condos seem to be doing worse compared to last year. This is no surprise, given the overbuild situation the city condo market finds itself in.”